[question removed by moderator]
Answer is C per the exam.
Aren’t B and C both correct? Contango is negative roll yield and Backwardation (futures price < spot) is positive roll yield.
Have errata been posted yet?
C jumped out to me as right in the moment. I’d never heard “negative roll return”, but the answer even uses that language.
I don’t see why you’re wrong.
I was just going the exact same question. I put B also. Maybe something in the chart they posted, Exhibit 3, shows that the Ag Index isn’t in contango? That is my only idea.
Let me know because I want to add 1 more correct question to my score too.
JeffO15 wrote:
I was just going the exact same question. I put B also. Maybe something in the chart they posted, Exhibit 3, shows that the Ag Index isn’t in contango? That is my only idea.
Let me know because I want to add 1 more correct question to my score too.
You’re right.
Future return = Spot + roll
Agriculture Future return = 0.74% Spot = 4.6% Threrefore not in contago
Energy Future return = 5.32% Spot = 7.87% Backwardation
The dirty tricks in this exam are astounding.
sorry how did you get this?
if i use your formula above and what i think you mean, then energy future return = 7.87 (spot) + 2.55 (roll) which would mean that future > spot and the market is in contango - not backwardation,
have i misunderstood?
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